Understanding Accounting Principles

This assignment delves into the core concepts of accounting. Students are tasked with analyzing various accounting principles, exploring different types of financial accounts, and understanding their roles in financial reporting. The assignment also examines real-world examples and case studies to illustrate the practical applications of these principles. A thorough understanding of these fundamentals is crucial for comprehending financial statements and making informed business decisions.

Financial Accounting
Principles

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
A Presenting report to the line manager about accounting rules, regulations and principles 1
1. Determining the financial accounting................................................................................1
2. Identifying the necessary financial accounting regulations................................................2
3. Defining the rules and principles of accounting.................................................................3
4. Elaborating the concepts and conventions relevant with material disclosure and consistency
................................................................................................................................................4
CLIENT 1........................................................................................................................................5
1. Presenting the book of prime entries..................................................................................5
2. Completion of the double entry recording in the ledgers...................................................7
3. Determining the arithmetical accuracy of with the help of trial balance.........................15
CLIENT 2......................................................................................................................................15
A Disclosure of the income statement for Peter piper for 31st December 2017..................15
B Disclosure of the financial position of Peter piper of 31st December 2017.....................17
CLIENT 3......................................................................................................................................19
A Disclosure of the financial income statement of Raintree limited....................................19
B. Disclosure of the financial postilion of Raintree limited such as....................................20
C. Analysing the concepts of prudence and consistency of accounting...............................24
D. Reason behind analysing depreciation with the help of two methods and their importances
..............................................................................................................................................25
CLIENT 4......................................................................................................................................26
A Determining the purpose of preparing bank statement for Kendal..................................26
B. Factors that influence the causes of recording the transaction of bank statements.........26
C. Disclosure of BRS...........................................................................................................26
CLIENT 5......................................................................................................................................27
A Preparing the purchase and sales ledger control accounts................................................27
B. Analysing the needs of preparing control account...........................................................28
CLIENT 6......................................................................................................................................29
A. Determining the Suspense account and its main features................................................29

B. Preparing the Trial balance on the basis of proposed elements.......................................29
C. Preparing the journal entries on the basis of trial balance adjustments...........................29
D. Determination the comparison between suspense-account and clearing account...........30
CONCLUSION..............................................................................................................................30
REFERENCES..............................................................................................................................31

INTRODUCTION
To estimate the future expenses and having the accurate control over the costs for the
operations held in the premises there is need to have the proper financial control. In order to
analyse various principles and norms of the financial disclosure will be helpful for professionals
in terms of presenting the disclosure of such data set. In the present report there will be
discussion based on various financial accounting, boards, principles, concepts, rules and
regulation that is fruitful in terms of analysing the growth and profitability of entity. There will
be various clients and their transactions will be recoded in various accounting books and they
will be advised to improve the financial growth of firm.
A Presenting report to the line manager about accounting rules, regulations and principles
To: Line manager
Subject: Informations relevant with accounting principles, rules and regulations which
essential for financial growth of organisation.
Sir,
To enhance the profitability and the operational functioning of the organisation in terms
of analysing the costs, expenses and the level of financial spending over each tasks in the
premises. Therefore, it plays the main role in presenting the disclosure of such data set by
following all the rules and regulations which are being set by accounting standards and boards.
However, such tools helps in financial decision making with efficient accuracy such as:
1. Determining the financial accounting
It refers to the record of all the financial transactions in different books or financial
instruments that will be disclosed among the users of such financial informations such as
Owners, accounting professionals and investors. There are 4 kinds of financial statements such
as:
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Illustration 1: Types of financial accounts
(Source: Gordon and et.al., 2017)
Therefore, in consideration with these statements the business will be beneficial in terms
of having accurate decisions relevant with costs control, lowering down the overhead expenses
as well as planning for the expansion of operational activities for business. On the other side the
external stakeholders such as shareholder's they seek the turnover generated by firm during a
period that will benefit them in acquiring the appropriate dividends.
2. Identifying the necessary financial accounting regulations
To present the financial disclosure this is essential that the organisation must follow the
framework of accounting operations. These are the principles which are universally followed
and accepted by each individual or corporations. Therefore, the motive behind such regulations
is that a company can become able to facilitate the financial informations to the worldwide
users as well as they will become able to understand growth and profitability of a business and
they can make investment decision for the firm (Li, Sougiannis and Wang, 2017). It will be
helpful for entity in terms of acquiring the appropriate capital funds for the future operations.
Therefore, there are some accounting standards and boards which are as follows:
IASB:
This is the board of setting the accounting standards that helps in funnelling in terms of
preparing the favourable reports of financial transactions (Kouki, 2018). These boards are
beneficial as it facilitates the adequate information as well as guide the accounting professional
to follow such rules and prepare for the financial disclosure.
FRC:
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This board is constituted by Ireland and UK for their personal regulatory in terms of
financial disclosure and the trade practices between such nations. Therefore, this board is
incorporated with the six relevant operational bodies such as financial reporting review panel,
accounting standards board, accountancy and actuarial discipline board, auditing practices
board, board for actuarial standards and professional oversight board (Financial Reporting
Council, 2018).
IFRS:
This is the board which has facilitated the adequate informations relevant with the
financial disclosure made bay organisation. The norms and principles set by this financial
standard with the motive to facilitate the proper framework of presenting the data set. It
includes preparation of various financial statement such as balance sheet, profit and loss
accounts, change in equity and cash flow statements (Ombati and Shukla, 2018). Therefore,
with the help of such standards the business will be fruitful in terms of attracting the
international investors and that will probably increases capital generation of firm.
3. Defining the rules and principles of accounting
To analyse the business performance and have the strong financial decisions there are
various rules and principles of accounting which are facilitated by the GAAP and various
accounting boards. The motive of presenting board is to present accurate information,
techniques and methods to make disclosure of financial data base by professionals. Therefore,
there are several rules and principles of accounts such as:
Monetary Unit:
These principles lie over the concept that all the transactions must be recorded in the
currency from such as purchase of fixed assets, making payments or revenue gained by firm
(Warren and Jones, 2018). Thus, the motive behind such system is that it will be helpful for the
business in terms of decisions making as well as engaging them in estimating costs incurred in
liabilities and assets of the period.
Going Concern:
This principle lies over the concept that if a business has started operating in the current
time it will be estimated that it will operate in the upcoming time too. It is assumed that it will
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have continues operations which helps in analysing the depreciation value, estimating expenses
and the future investments of the firm (Basic accounting principles, 2017).
Conservatism:
This concept lies over the technique of recording the transactions on the basis of surety
and reliability. Therefore, it can be said that the transactions relevant with liabilities and
expense of organisation which are to be recorded mediately as it incurred while on the other
side to record the transactions relevant with assets and revenue generated by firm there is need
to have surety and adequate research over the sources from where they have incurred (Cairns,
2018). It helps in recognising the losses in the initial level so an accurate decision can be made
in context with overcoming such financial deficits.
Cost principles:
In accordance with this concept it can be said that there is need to have record of all the
transaction such as purchase and sale of products and services on their fair value. Therefore, it
will be helpful in terms of analysing the profits and losses gained by firm while dealing with
such commodities (Marshall, 2016). On the other side, it will be helpful as the determined costs
of such activities will be considers and strong decision will help in lowering down such
expenses.
Time period principles:
The principle is consisted of the time boundedness over the disclosure of the financial
data set. Therefore, it will be fruitful for the organisation in terms of preparing the financial
statement on the periodical basis such as quarterly, half yearly or annually. It can be based on
financial year for making the adequate disclosure of the financial data set (Oulasvirta, 2016).
Hence, with the influence of time limits the professionals in firm ad the external will analyse
growth and performance during such period.
4. Elaborating the concepts and conventions relevant with material disclosure and consistency
Concepts and Conventions of material disclosure:
In term with these accounting principles which lie over the concept that all the data must
be recorded and transit have a material fact and must be authenticate. Therefore, the purchase
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and sales of any product and service should be relevant with the proper source such as there is
need to have record of date, time and consideration which will be beneficial for the operational
development (Pratt, 2016).
Concepts and convention of consistency:
This concept lies over the principle that every financial disclosure must be on the
regular basis such as presenting a data set will have the preparation for the next presentation
(Singleton-Green, 2016). Therefore, it will build the continuity in the operations of the firm.
There will be adequate revenue gathering on the basis of proper business execution.
CLIENT 1
1. Presenting the book of prime entries
The presentation relevant with the journals entries following the transactions incurred
Alexandra Study. It will be based on various adjusting entries relevant with the purchase and
sales of the business such as:
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6

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2. Completion of the double entry recording in the ledgers
In accordance with the Journal entries there has been presentation of ledger accounts of
each transactions and account holders such as:
8

9

10

Sales Ledge accounts
11

12

Nominal Ledger:
13

14

Real Ledge accounts:
15

3. Determining the arithmetical accuracy of with the help of trial balance
In accordance with journal and ledge entries of the client Alexandra study the following
is the presentation relevant with Trial balance such as:
Particulars Debit Credit
Van 28500
sales 4050
purchase 220
drawings 1500
motor expenses 8000
Bank 29600
Cash 1970
A/c payable 8220
A/c Receivables 4050
Suspense-account 17570
Total 51840 51840
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CLIENT 2
A Disclosure of the income statement for Peter piper for 31st December 2017
Particulars Amount
Revenue 1215000
Less: Cost of goods sold -759360
Gross profit 455640
Salaries and wages 177500
O/S wages and salaries 1220
Less: Indirect expenses
Administration expense -17650
motor expenses -87400
Advertising -13280
Heating and Lighting -4950
Less: Prepaid 8470
Depreciation on Equipments -17250
premises depreciation -5400
motor vehicle depreciation -2800
Total indirect expenses -318980
Net profit 136660
17

B Disclosure of the financial position of Peter piper of 31st December 2017
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CLIENT 3
A Disclosure of the financial income statement of Raintree limited
Particulars Amount
Revenue 107000
less: sales returns 2000
Cl. Inventory 18000
Op. Inventory 17000
purchase 32000
Total Gross profit 74000
Less: Indirect expenses
Additional Dep. 36000
distribution expenses 22000
administrative costs 28000
Less: Prepaid rent 3000
Add: O/S wages 2000
Operating gains 85000
Operating loss
Less: Interest paid 11000
Less: Corporate tax 4000
Income from continuing operations 7000
Net profit 18000
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B. Disclosure of the financial postilion of Raintree limited such as
20

21

22

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C. Analysing the concepts of prudence and consistency of accounting.
In accordance with the motive of various international institution that has facilitated the
adequate informations which are relevant with the operations of business as well as provide
essential help to enhance performance. Therefore, there are several concepts which are as
follows:
Prudence:
This concept lies on overestimating the value of revenue and gains while it pay less
attention over liabilities and expenses of the firm. It can be said that this is relevant with the
conservatisms while presenting the financial disclosure. Therefore, with the help of this
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technique the professionals make assumptions over the level of increment in the liabilities as
well as capacity of firm in meeting the debts of business (The prudence concept, 2013).
Consistency:
It refers with recording the transactions and presenting the data set on regular basis.
Therefore, the concept lies over the technique that there is no need to break the continuity and
the regular analysis of financial will be helpful for the business development as well as
improvement in the operational performance (Pawlowski, Nalbantis and Coates, 2018).
D. Reason behind analysing depreciation with the help of two methods and their importances
To analyse the amount of depreciation over an asset will be beneficial for the firm in
terms of analysing its resale value. It can be measured with the help of two different methods
which are listed below as:
Straight-line method:
In order to analyse the depreciation over assets the straight-line method is very useful as
is the fixed and constant method of analysing the resale value. It considers the useful life of asset
which will be divided by the cost priceless scrape value. Therefore, such presented outcome will
be depreciation value which will be deductible every year as same from the remaining amount of
assets (Samreen, 2018). However, it is the most helpful as well as easiest method which is
helpful in terms of analysing the resale value of assets.
Written down method:
This concept lies over the technique of measuring depreciation on assets as per reducing
the percentage amount of value for the total value of assets and the remaining amount will be
measured again for the same percentage levied over the assets (Kouki, 2018). Therefore, it can
be said that it is fruitful technique in terms of analysing the resale value of the assets. It can be
said that as the value of assets diminishes the value of charging depreciation also reduced. It will
be fruitful as the resale value of asset will become comparatively adequate and profitable for the
business as according to straight-line method.
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CLIENT 4
A Determining the purpose of preparing bank statement for Kendal
To prepare, measure and analyse the bank statement which will be fruitful in terms of
having proper information relevant with the credits, drawings, borrowings and deposits incurred
in the particular period. However, with the help of such analysis it can be said that by analysing
such informations the individual and corporation will have proper informations regarding all the
monetary transactions and the remaining balances of the account (The Purpose of a Bank
Statement, 2016). Therefore, there are several befits of presenting the bank statements such as:
 It records all the transactions relevant with the spendings and expenditures for the period.
 The informations are relevant with the activities held in the particular account.
 The preparation of reconciliation will be helpful for the business in terms of matching
and cross checking the records (Gordon and et.al., 2017).
 It will be helpful in tracing the unauthenticated expenditures and that will be helpful in
terms of controlling the credit and analysing such fraudulent acts.
B. Factors that influence the causes of recording the transaction of bank statements.
There are several factors that influence the bank statement and the balances of the end of
period. It includes outstanding cheques, dishonour if checks, deposits, withdrawals as well as
interest charge over the period. Therefore, these are the credit expenditures of the account which
will naturally reflect deficit in the statements (Li, Sougiannis and Wang, 2017). However,
analysing such factors will be helpful for the business in terms of having the adequate
development as well as they will plan for the expansion of operations. It can be said that the
disclosure will be helpful for the analysing the actual balance left and the actual expenditure
made during the year.
C. Disclosure of BRS
BRS:
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Cash book:
CLIENT 5
A Preparing the purchase and sales ledger control accounts
There has been preparation of the sale and purchase ledger control account which in turn
fruitful for enhancing the business operations as well as making the adequate operational
activities in the premises (Marshall, 2016). The main objective behind presenting such accounts
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is that there is need to have proper execution and control over the business operations as well as
better revenue retention by the professionals in the organisation.
Sales Ledger control account:
Date Particulars Amount date Particulars Amount
I/
05/2017 To balance b/d 12600 By debtors 141610
To Credit sales 152350 By bad debts 120
By discount
allowed 380
by sales return 7320
by contra set off 330
By. Bal. C/d 15190
Total 164950 Total 164950
To Bal. B/d 15190
Purchase ledger control account:
Date Particulars Amount date Particulars Amount
To creditors 101010 01/05/17 By balance b/d 9160
To discount received 290 By bank 400
To Bal. B/d 23320 By credit Purchase 116500
To purchase return 1110
To contra set off 330
Total 126060 Total 126060
By bal. B/d 23320
B. Analysing the needs of preparing control account
There is preparation of accounts which determines each departments in the organisation.
However, in accordance with the name of it can be said that the accounts are to be executed and
controlled by the professionals in terms of making the strong decisions which will be fruitful in
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terms of analysing the costs or gains of business in such period (Oulasvirta, 2016). Therefore,
these are the accounts which are normally p reared and measured by big organisation in terms of
fetching the informations which are relevant with the operations of each unit in the premises
such as purchase, sales, marketing, production etc. thus, it is the helpful tool that helps in making
the adequate estimation of business performances.
CLIENT 6
A. Determining the Suspense account and its main features
In accordance with the motive behind preparing the suspense account is that, it helps in
bringing promptness in terms of operating accounts. It helps in balancing the particular
statements till the professional analyse the belongingness of such transactions to the particular
sources (Pratt, 2016). Hence, it creates suspense and on the other side it is necessary that all the
suspense account must be solved before the final presentation of the accounts. Here the motive of
preparing such accounts is that it will help in making promptness in the work as well as
analysing the adequacy of the business operations.
B. Preparing the Trial balance on the basis of proposed elements
Particulars Debit Credit
Sales 1100
Purchase 700
Bank 840
rent paid 250
Travel expenditures 160
Accounts receivables 540
Accounts payables 350
Capital 710
Trade payable (b/f) 330
Total 2490 2490
C. Preparing the journal entries on the basis of trial balance adjustments
S.no. Particulars Debit Credit
1 Smith a/c dr 220 220
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To sales a/c
(Wrong entry)
Simon A/c dr
To Sales a/c
(Right entry) 220 220
Simon A/c dr
To Smith A/c
(Rectified entry) 220 220
2
Jones a/c Dr.
To Suspense a/c
420 420
3
Whites Personal A/c DR.
To Suspense a/c
750 750
D. Determination the comparison between suspense-account and clearing account
Illustration 2: Differences between suspense account and clearing account
(Source: Singleton-Green, 2016)
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